U.S. Department of Justice

United States Attorney's Office
Eastern District of Pennsylvania
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$1.6 MILLION SETTLEMENT AGREEMENT ANNOUNCED WITH CHI INSTITUTE FOR ALLEGED FAILURES TO COMPLY WITH FEDERAL STUDENT FINANCIAL AID REQUIREMENTS

PHILADELPHIA - A $1.6 million settlement agreement was filed today resolving
allegations that CHI Institute ("CHI"), in Broomall, Pennsylvania, failed to provide its students with
the educational program it had promised them, announced United States Attorney Zane David
Memeger. CHI is a proprietary school, which offers career-focused, technical and vocational
courses. CHI is part of Kaplan Higher Education Corporation, a subsidiary of Kaplan, Inc., which
is owned by The Washington Post Company.

The settlement resolves allegations raised by a whistleblower pursuant to the qui tam
provisions of the False Claims Act and resolves the findings of a Department of Education program
review. The qui tam action and the program review focused on a program that CHI formerly offered
that led to a diploma in surgical technology, also called a "surg tech" program. The majority of
students who enrolled in the surg tech program received some form of federal student financial aid
– by way of grants, direct federal loans, and/or guaranteed student loans.

The surg tech program included both classroom time and an externship at a hospital or
surgery center. The externship was a form of field training in a clinical setting. To graduate from
the surg tech program, a student had to complete both the classroom and the externship portions of
the program.

The qui tam action and the program review alleged that CHI misled students and the federal
government about the availability of externships necessary for students to graduate from the surg
tech program. That is, the qui tam action and the program review alleged that CHI did not have
sufficient externship spots for all of the students who signed up for the surg tech program. The
result, according to the allegations, was that students paid CHI – with federal student financial aid
– for an educational program that CHI knew it could not provide. The program review went on to
allege that CHI did not comply with a number of federal student financial aid program requirements.

"Federal education assistance is a cherished resource that the government provides to
help promising students who cannot afford the rising costs of higher education," said Memeger.
"The institutions that benefit from such assistance must deliver what they promise - whether it is
in the form of classes, training, or preparing to successfully enter the job market. When those institutions fail to deliver, we all lose, but perhaps more importantly, individual students are denied valuable opportunities to succeed."

In accordance with the settlement agreement, CHI will make total payments of $1.6
million. Included in that amount are payments to satisfy the student loans of surg tech students
who did not receive the promised externships. Also included in that amount are payments to the
federal government for losses associated with the federal student financial aid program, and a
payment to the whistleblower pursuant to the False Claims Act.

The case was investigated by the Department of Education Federal Student Aid Office
and the Department of Education Office of Inspector General. It was prosecuted by Assistant
United States Attorney Michael S. Blume.